Hugo Boss Case Study

This case study was presented at the e-P Summit 2023.

The interview was conducted by Martina Schiuma, Head of Sustainability at The ID Factory, with the founder of The ID Factory, Massimo Brandellero, and Alberto Lampis, Strategic Sourcing Raw Material Senior Specialist at Hugo Boss.

Here you can see the video in Italian click this link.

The beginning of the collaboration between Hugo Boss and The ID Factory

ALBERTO LAMPIS: “We started the collaboration with The ID Factory in 2016.

We had a lack of control of our supply chain, especially on the full merchandising side. Many of our suppliers used Excel for procurement management and we didn’t have organized and timely information.

The goal was to create a system would allow me to monitor orders to understand how my supply chain was structured.

Initially, the focus was on product risks: understanding if my supply chain placed material orders on time and if it had appropriate chemical and physical testing.

In case of any failure, through the platform, I identify who in my supply chain didn’t follow the process and where it was interrupted.

It is clear the primary need was not even remotely sustainability or the Digital Product Passport, but rather material traceability and control”.

The keyword “Control” in global and opaque supply chains

MASSIMO BRANDELLERO: “Let’s start with the word Control. The ID Factory was born 10 years ago as an idea and 8 years ago as a company.

Today, we are a B-corp that digitizes the production processes of Operations, for the brand and its supply chain by providing control.

We started with Alberto and Hugo Boss with the materials, with the control on the procurement side, then there was an evolution towards the need for qualitative control, followed by compliance control.

Gradually, this became an integrated service supporting sustainability.

Today, this very systemic and granular approach allows us to have a structured set of information that enables us to have a Digital Product Passport linked to the supply chain, dynamic and scalable”.

What value did you see in The ID Factory, and how has it evolved over time?

ALBERTO LAMPIS: “Until 2016, we didn’t have transparency. With The ID Factory’s platform we could perform a risk assessment for the delay and identify the exact batch that was shipped and tested, without blocking the entire production.

The work concerned the production control, quality control, risk management, and chemical and physical testing.

For the past couple of years, all divisions of Hugo Boss have been publishing their Tr1s. With this Digital Product Passport project, we are going further down the supply chain, not only identifying the factory but also the suppliers of that factory.

We want to verify who the suppliers of our suppliers are, what materials they use, and what certifications exist in our supply chain.

In this way, we can provide added value to the product become more transparent”.

Market complexity and the role of new laws – Is this evolution due to the increased complexity of the market?

ALBERTO LAMPIS: “The complexity of the market has increased, together with the arrival of new legislations.

It’s not popular to say, but brands often change their jobs when they are forced to. Think about the German and French legislation, the greenwashing claims, the EU regulations etc.

The market’s demands have changed, and we must adapt quickly.”

How did the Digital Product Passport become part of the entire supply chain traceability process?

MASSIMO BRANDELLERO: “Today, we talk about the Digital Product Passport, but the concept of the digital material passport was already part of our tool.

When we started, we applied QR codes to every piece of fabric, leather, or accessory bag. We digitized the quality control process that involved activating a unique code, a product code, on each raw material.

Then, we started connecting these raw materials to the creation of the product.

The Digital Product Passport for the finished product became a natural extension of the digitized activities and processes in Operation.”

ALBERTO LAMPIS: “A group like Hugo Boss, like many fashion groups today, has 29 Product Divisions, each with its own distinct needs.

If you want to start implementing these traceability procedures you have to start with pilot projects and then scale up. We begin with simple projects and gradually move towards complete supply chain traceability.

If we hadn’t started years ago, we wouldn’t have this depth of information today.

It is crucial to start as soon as possible, you can’t wait until 2025, when the law on market transparency comes into effect, to implement a traceability tool.”

MARTINA SCHIUMA: “This is an extremely important point because, as an innovation provider, we often deal with this issue with brands.

The Digital Product Passport is definitely the beginning of a new journey towards circularity, but it is certainly a point of arrival compared to a traceability system: the first necessary step is to implement it.”

Can we talk about the Digital Product Passport without a traceability system?

MASSIMO BRANDELLERO: “Two month ago, I would have said yes! They can coexist without necessarily integrating.

Today the situation has changed a lot, new regulatory requirements, new problems to face etc.

Having a Digital Product Passport without integrated supply chain traceability means not having the availability and validity of primary data provided in real time and connected directly with the supply chain.

The supply chain traceability and Digital Product Passport must be integrated, they are interconnected.”

ALBERTO LAMPIS: “The purpose of a traceability system is to have an automatic system, directly connected to the Digital Product Passport.

If I change materials or suppliers, it should be reflected in the Digital Product Passport. It shouldn’t be static but dynamically updated.

So, if the market demands a specific shoe, I know exactly the specific batch, the specific tannery, and, if possible, the specific slaughterhouse.”

MARTINA SCHIUMA: “Another aspect that we increasingly recognize is the need for validation.

Not only in terms of how far we can trace along the supply chain but also how confident we can be in the data itself.

So, we need to ask how can we talk about traceability without validated data. We are currently facing a historical moment, considering what happened in India with Control Union regarding cotton certifications.

A certification alone is not sufficient to demonstrate the traceability of a product.”

How do you think that traceability services, with direct involvement of suppliers, can provide a service to the companies to validity data?

MASSIMO BRANDELLERO: “The certifications are necessary, they are fundamental, but they are not enough. They are a support, but without extremely precise, clear, and granular governance of supply chain information, they cannot guarantee full validity.

Last week, we were discussing with a brand, starting from Indian data, and it seems that 40% of the declared organic cotton is not organic. This has a huge impact on the industry.

We were in the logistics warehouse of this company, and they only had documentary compliance traceability. They cannot identify which supply chain is genuinely guaranteed by valid certifications and which is not.

When we look at a world that speaks of 40%, we need to start asking ourselves questions. Certainly, certification is useful and supportive, but is it enough? Maybe not.”

ALBERTO LAMPIS: “I would also add another consideration regarding non-certified materials because, obviously, we cannot rely solely on certifications. There is a significant portion of production in companies and brands we work with that are not certified.

Brands working in a full merchandising system must trust third-party certifications because verifying the entire supply chain, as in the case of Hugo Boss, is very challenging.

However, we needs to be a change in mindset. We accept the certification must they be integrated with internal audits managed by the brands”

What do you think will be the evolution of the Digital Product Passport over time?

ALBERTO LAMPIS: “It will involve the product at the end of its life cycle. Through the platform, the customer will have the possibility to return the shoes to Hugo Boss and have it authenticated through the Digital Product Passport application, enabling it to be reintegrated into a circular economy policy.”

MASSIMO BRANDELLERO: “The applications of the Digital Product Passport are numerous, so we need to adopt the right mindset because technology is not the limit, it is only a support. We must understand how we want to used it.”

MARTINA SCHIUMA: “We started from the future, from the Digital Product Passport, to go back to the supply chain. The real challenge will be to involve the supply chain more and more and adopting the right mindset. We need to find ways to bring all this information to the consumer so that tomorrow we can enable circular business models.”

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Appendix

What is Digital Product Passport?

The Digital Product Passport initiative is part of the Ecodesign for Sustainable Products Regulation (ESPR) and one of the key actions under the EU’s Circular Economy Action Plan (CEAP). It is key to the EU’s transition to a circular economy and will provide information about products’ environmental sustainability. It aims to improve traceability and transparency along the entire value chain of a product and to improve the management and sharing of product-related data which are critical to ensuring their sustainable use, prolonged life, and circularity.

We are part of the benchmark analysis, which is the EU analysis focused on finding the main DPP standards that will support the definition of the legislation: The CIRPASS project:

‘’Collaborative Initiative for a Standards-based Digital Product Passport for Stakeholder-Specific Sharing of Product Data for a Circular Economy’’.

Its goal is to assist the Commission in understanding the activities that will be necessary to enable the DPP system. Click here and discover more

The real difference between the various DPPs solutions?

If you want to be compliant with the emerging laws, it’s impossible to talk about Digital Product Passport without a structured traceability system. Many digital product passport solutions are emerging, some more focused on marketing and communication with consumers. Others focus on product authentication against any counterfeiting. The most important thing for the Digital Product Passport to be useful and decisive towards the law and the respect of consumers is that it is integrated with a hub of traceability data, connected directly with all the supply chain.

This is the only way we can talk about real transparency of information.

The potential of this new tool for traceability and transparency in the fashion world is incredible, but the common factor remains in making more informed choices and knowing the impact they have on the world.

The Circular Economy Action Plan (CEAP)

It is a key part of the EU legislative programme that will impact several sectors from textiles, construction products, car batteries, customer electronics, food, and packaging.

It is especially for this purpose that the Digital Product Passport (DPP) has been designed as part of the legislative framework to be published in 2024.

Inside the regulation, a twofold purpose is stated:

• Increasing product sustainability levels by extending product life and optimizing the use of materials.

• Improving the transparency of product information to make it available to all stakeholders, especially consumers who will be more educated about purchasing decisions.

 In some countries such as France, labeling the product with processes traceability and sustainability information is already mandatory as part of the French Decree on consumer information about the environmental qualities and characteristics of waste-generating products which was published last year and entered into force this January.

 The Digital Product Passport is a very powerful smart labeling tool that represents a key asset for shifting to a circular economy in the very near future, as the EU has envisioned in the Circular Economy Action Plan.